Bank to force closure of BFN accounts
Butterfield Bank will shut down the bank accounts of the Bermuda Financial Network on Thursday, in effect putting the 26-year-old company out of business.
It will mean the end of Easy Pay, Bermuda’s first online money transfer service (2000/2001) which relied entirely on these accounts and the service provided by Butterfield in order to process payments.
In an e-mail to hundreds of customers, BFN said the reasons given by the bank were “specious”, but conceded: “The bank is within its legal and contractual rights under its terms and conditions to close anyone’s account at any time for any reason or for no reason at all.”
When contacted by telephone BFN president and chief executive Dal Tucker pointed out that the bank had that right with any customer.
Butterfield refused to comment on the situation with BFN, when reached by The Royal Gazette, citing standard confidentiality undertakings with regard to specific client relationships.
But a bank spokesman did say: “Generally speaking, Butterfield conducts periodic reviews to ensure client compliance with regulatory requirements, international standards, and our own risk appetite. We work with clients to remediate any deficiencies over a reasonable time frame, and would move to permanent account closure only as a last resort.”
Mr Tucker said: “We pointed out to them that the [AML/KYC] statements they had made to us were false and without merit.
“It is normally the BMA to whom financial institutions would have to answer, but the bank came in with their own questions and concerns.
“We work with the BMA, as would any financial institution. We’ve never been cited or hit with penalties.
“Just like any other institution, compliance costs us a fair amount of money and we take it seriously.”
BFN was involved in about 100,000 transactions a year that may now end, including customers paying their American Express cards and also those paying overseas bills.
There was a total of $370 million in transactions per annum, including more than $200 million through Easy Pay in local and overseas bill payments, in recent years.
BFN employs three full-time staff, five part-time and two consultants.
BFN’s note to clients had continued: “We have requested a 30 to 90-day extension to allow for an orderly transition but have had no response from the bank and so must prepare for the possible account closure on September 15.
“Last payments should be made on the 14th to be safe. We will keep you informed on any updates, or if the extension is granted.”
Mr Tucker said that the bank first informed BFN about the account closure on June 15.
But the communication to clients said: “The specious reasons given, for our account closure, in their initial letter, related to a claim of non-compliance with some AML/KYC procedures.”
Mr Tucker told us: “The statements made by the bank are untrue and we have pointed that out to them, and proven as such.
“BFN has always met all compliance and regulatory requirements set by the Bermuda Monetary Authority for financial institutions. There have always been changes in terms of the requirements and like everyone else, we adjust appropriately.”
A customer who contacted the newspaper said he had been loyal to BFN because of their customer service.
BFN’s prices rose a few years ago, when Butterfield’s prices went up substantially, according to Mr Tucker.
He said BFN lost a substantial portion of its client base at that time, but most customers remained.
BFN’s web site says the firm became the payment manager for American Express in Bermuda in 1998, and were processing over $170 million for merchant and card member payments per annum for more than 1,000 Amex clients in Bermuda.
BFN launched Easy Pay in 2000, providing internet-based electronic payments for local and overseas clients.
These included payroll, bill payment, collection of fixed amounts, and funds transfer.